Biden Treasury Nominee Janet Yellen Seeks Large Tax Increases

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Posted by Alex Hendrie on Tuesday, January 19th, 2021, 9:16 AM PERMALINK

Members of the Senate Finance Committee are considering the nomination of Janet Yellen to be Secretary of the Treasury.

Yellen supports several tax increases including repeal of the Tax Cuts and Jobs Act (TCJA), which reduced taxes for middle class families and small businesses. Yellen also supports a $2 trillion energy tax that would increase the cost of electricity and consumer goods and services for Americans across the country.

Yellen opposes the Tax Cuts & Jobs Act, as noted in an April 2018 op-ed where she argued that there was no need for a tax cut because, “the economy was already at or close to full employment and did not need a boost.”

Americans who found jobs after the enactment of the tax cuts would disagree. After the tax cuts were signed into law in December 2017, the unemployment rate dropped from 4.1% down to 3.5% just before the pandemic hit. African American unemployment dropped from 6.7% to 5.8% and Hispanic unemployment dropped from 5.0% to 4.4%. Over 5.1 million jobs were created from December 2017 to February 2020. Median household income increased by $4,440 or 6.8% in 2019 -- the largest one-year wage growth in history.

It is important to note that this economic prosperity came despite significant headwinds to the economy. In fact, Moody’s Analytics Chief Economist Mark Zandi estimated that tariffs imposed by President Trump cost 450,000 jobs per year they were in effect.

Repealing the Tax Cuts and Jobs Act will repeal the 20 percent small business deduction and raise the corporate rate, which will prolong the economic downturn and hider growth and the creation of new jobs.

It will also directly increase taxes on American families.

American middle-income families saw significant tax reduction because of the TCJA. Specifically, taxpayers with AGI of between $50,000 and $100,000 saw their tax liability drop by an average of 13 percent. This is more than twice as much as taxpayers with AGI of $1 million or more, who saw their average tax liability drop by 5.8 percent.

In addition, repeal of the tax cuts means the individual mandate tax will come back into force, hitting five million households with a tax of between $695 and $2,085. 75 percent of these households make less than $50,000 per year.

Yellen also supports an Energy Tax of at least $40 per ton of Carbon. Yellen is a founding member of the Climate Leadership Council (CLC), an “international policy institute” lobbying Congress to pass this carbon tax, which would increase every year at 5% above inflation.” Yellen is also the author of a recent study commissioned by CLC,  Exceeding Paris, that recommends a $43/ton carbon tax.

There is bipartisan recognition that an energy tax would harm low-income households and increase the cost of electricity and household goods. In 2016, Hillary Clinton decided to oppose a carbon tax after she learned the following from an internal Clinton report prepared by policy staff:

  • The Hillary memo states that a carbon tax would devastate low-income households: “As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.”
     
  • The Hillary memo states that a carbon tax would cause gas prices to increase 40 cents a gallon and residential electricity prices to increase 12% - 21%: “In our analysis, for example, a $42/ton GHG fee increases gasoline prices by roughly 40 cents per gallon on average between 2020 and 2030 and residential electricity prices by 2.6 cents per kWh, 12% and 21% above levels projected in the EIA’s 2014 Annual Energy Outlook respectively. 
     
  • The Hillary memo states a carbon tax would cause household energy bills to go up significantly: “Average household energy costs would increase by roughly $480 per year, or 10% relative to the levels projected in EIA’s 2014 Outlook.”
     
  • The Hillary memo states that a carbon tax would increase the cost of household goods and services: “The cost of other household goods and services would increase as well as companies pass forward the higher energy costs paid to produce those goods and services on to consumers.”

Photo Credit: Gerald R. Ford School of Public Policy University of Michigan

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